Recharge Standard Operating Procedures

 

SUBJECT:

Allowable/Unallowable Expenses for Recharge/Service Centers

SOURCE:

Cost Accounting, Financial Management Services

DATE ISSUED:

March 2016

DATE OF LAST REVISION:

 

N/A

RSOP NO:

6.0 

RATIONALE:

To provide guidance to units about expenses that cannot be included in their recharge/service center rate.

RSOP:

Allowable costs - Costs that may be recovered in the recharge/service center billing rates that meet the following criteria:

  1. Are reasonable and necessary to provide goods and/or services by the recharge/service center. 
  2. Conform to any to any limitations or exclusions set forth in cost principles in the Uniform Guidance or other applicable cost standards established by federal agencies or the university.
  3. Are consistent with applicable university policies and procedures.
  4. Are accorded consistent treatment for the same type of cost in like circumstances.
  5. Are not included as a cost or used to meet cost sharing or matching requirements of any federally-financed program in either the current or a prior period.
  6. Supported by adequate documentation the cost was incurred. 

Cost Accounting regulations (commonly referred to as Uniform Guidance) identify certain expenses that are not allowed to be included in the recharge/service center rate calculation.

 

For a list of unallowable expenses, please refer to Unallowable Expenses.

 

If a recharge activity has an unallowable expense that hits the recharge/service center (66) account in the current year, the unit should initiate a Distribution of Income and Expense (DI) document to move the unallowable expense to a different operating account.

 

If a recharge activity has identified a prior year unallowable expense in their recharge/service center (66) account, the unit should initiate a DI document to move the unallowable expense to a different account using the Balance Sheet Adjustment-Unallowable object code (4993) in both the “To” and “From” sections. The DI document should refer to the original document where the unallowable expense occurred; as well as, the object code initially used.

 

If a prior year error has been discovered and the expense is determined to be allowable, object code 4999 (Balance Sheet Adjustment) should be used.  Please see ASOP 11.0 for more information.

 

Examples

 

Example 1: After fiscal year end it is determined that an unallowable advertising expense was posted in a recharge/service center account (66).  The expense should be moved to another operating (non-66) account in the current year by using a Distribution of Income/Expense (DI) document and object code 4993 in both the “To” and “From” sections.  The DI should refer to the original document where the unallowable expense occurred as well as the original object code used.   

 

DI

 

Object Code

To

From

{Non-66 account} Balance Sheet Adjustment – Unallowable

4993

$xxxx

 

{66 account} Balance Sheet Adjustment - Unallowable

4993

 

$xxxx

 

Example 2: After fiscal year end, it is determined that inventoried items for a recharge activity were incorrectly expensed in the previous year when they should have been counted as inventory.  A DI can be used to move the amount to inventory using object code 4999 since this is an allowable transaction for recharge activity. The DI should refer to the original transaction document and the original object code used.

 

DI

 

Object Code

TO

From

{66 account} Inventory

83xx

$xxxx

 

{66 account} Balance Sheet  Adjustment

4999

 

$xxxx

DEFINITIONS:

Recoverable Rate Calculation: The process that recharge/service center account goes through to determine the amount that they charge for goods or services to other Indiana University accounts.

 

Recharge/Service Center Activity: An activity that furnishes goods or services to another Indiana University department for the convenience of the university and charges a fee directly related to, and not more than the allowable cost to provide the goods or services.

 

Uniform Guidance: Code of Federal Register, Title 2, Subtitle A, Chapter II Part 200--- Uniform Administrative Requirements, Cost Principles, and Audit Requirements For Federal Awards

 

Unallowable Expense: Charges that cannot be recovered in your recoverable rate.

CROSS

REFERENCE:

 

OMB Uniform Guidance (PDF) "Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards"

RESPONSIBLE

ORGANIZATION:

 

Organizations that bill other Indiana University departments for goods or services